- Despite environmental concerns, 340 tanker orders have been placed this year, close to last year’s 350.
- Around 40% of the current tanker fleet is 15+ years old, contributing to increased new-build orders.
- Over 63% of tankers older than 2009 are engaged in sanctioned trades, complicating scrapping assessments.
Investment in new tankers is challenging, given environmental pressures, uncertainty over vessel designs, and doubts about the future of global oil demand. Despite these hurdles, ordering activity saw a major surge last year and remains robust in 2024, with around 340 confirmed orders since January, slightly below last year’s 350, reports Gibson.
VLCC and MR Segments Lead the Investment
The VLCC segment has seen the highest level of investment since 2015, with 42 confirmed and 16 reported orders. MRs have also attracted substantial attention, with over 130 orders placed this year compared to 145 last year.
On the other hand, investment in Suezmaxes and Aframaxes/LR2s has slowed, with 35 and 67 orders respectively, showing a notable drop compared to last year.
An unusual increase in Handy and LR1/Panamax orders has occurred, reversing a decade of underinvestment in these segments. This signals a shift in interest for previously neglected vessel sizes.
Expansion of Tanker Orderbook
The LR2/Aframaxes and MRs lead the tanker orderbook, with 17.5% and 17.2% of their existing fleet being replaced by new orders.
Suezmaxes have a 15% orderbook, while LR1/Panamaxes and VLCCs sit at 13% and 9.7%, respectively. Handy vessels remain at the bottom, with just 3.6% of the existing fleet on order.
Newbuilds Gain Value Against Secondhand Vessels
The uptick in tanker investment is largely attributed to the rising industry returns since the Russian invasion of Ukraine, as older ships are sold into Russian trade.
Newbuilding prices have risen by 55% since 2020, while secondhand ships, especially 15-year-old vessels, have seen price increases of 100-165%.
Aging Fleet Adds to Newbuild Demand
Around 40% of the global tanker fleet is 15 years old or older. Handies and LR1/Panamaxes are the oldest, with 75% and 63% of their fleets built before 2009.
VLCCs and Suezmaxes have about 35-37% of their fleet over 15 years old, while MRs and LR2/Aframaxes sit around 41% and 46%.
Grey Fleet Complicates Market Dynamics
The outlook for tanker demolition is complicated by the grey fleet. Nearly 63% of tankers built in 2009 or older are involved in sanctioned Iranian, Venezuelan, or Russian trades.
These vessels are effectively off-limits for a large portion of the mainstream tanker market, limiting available tonnage.
VLCC freight rates in the Arabian Gulf remain mixed, with rates showing an uptick despite muted November demand. In West Africa, freight rates picked up, especially for runs to India and the UKC. VLCC WAF/China is expected to fix at around WS61.5.
Suezmax and Aframax Market Overview
Suezmax rates have been relatively steady, with TD20 fixing around WS102.5 in West Africa.
The Aframax market in the Arabian Gulf saw consistent gains, with rates around WS150-160. Aframax rates in the Mediterranean were consistent, with Ceyhan loads fixed at 80 x WS177.5.
Clean and Dirty Tanker Market Trends
The LR2 and LR1 markets in the East have seen a boost, with TC1 rising to 75 x WS133.25, while MRs saw rates drop due to low demand. In the Mediterranean, Handies showed improvement, with rates around WS160.
Dirty product tankers in the Med were more active than in the North, with steady demand tightening tonnage availability.
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Source: Gibson
